I am moving to Costa Rica with my family to conduct a financial consulting practice there. I will have Costa Rican residency visa, will purchase a house and will be living there except for vacations when school
I plan to set myself up as an independent contractor
. I expect that I will earn less than the $80000 of earned income
which can be excluded from U.S. income tax
on Form 2555 Foreign
Earned Income Exclusion.
Due to the ability to take many deductions
not allowed under U.S. tax laws
I do not expect to own any Costa Rican income tax.
Costa Rica does not have any tax treaties
with the U.S. covering income tax or binational social security agreements.
Costa Rica doesn't have an exact equivalent of our social security law
. They do have a plan in which payments (about 12% of taxable income
) is paid into a plan which provides a pension
at age 60 and government
sponsored health care. It is optional for any independent contractor and since I am already 55 years old, has little to offer me.
Question: Do I owe self employment taxes on my income which is excluded from U.S. income tax under Form 2555?
If I do owe U.S. self employment taxes would I owe these taxes if I paid Costa Rican â€œsocial security?
Thanks for your help